VAT Consultation for VAT Compliance

Your expert for questions

Frank Gehring
Partner at PwC Germany
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Declaration consulting - VAT compliance: more than numbers in forms

The fulfillment of legal reporting obligations for VAT (VAT compliance) and thus the legal requirements affects VAT entrepreneurs of all kinds: whether based in Germany or abroad, whether legal entities, partnerships or sole proprietors, small businesses or multinational corporations. Often perceived as a burdensome obligation, the regular preparation of VAT returns actually provides a regular opportunity to check accounting data; and is thus an important indicator of the efficiency of any implemented Tax Compliance Management System (TCMS), and of internal control systems, and thus serves to avoid VAT risks.

All roads lead to Rome

Mastering Increasing Requirements 

As tax revenue and tax losses in VAT are increasing, so too are the requirements for records and reporting obligations both in the EU and outside the EU. More and more countries are demanding reports on the transaction level (e.g. SAF-T reports), in some cases even in real time (e.g. SII in Spain). Real-time reporting of relevant transactions at the transaction level provides new verification and intervention options for the tax authorities in the event of an implausibility. For example, it is possible to check on a daily basis whether the VAT that the service recipient is claiming as an Input VAT deduction has already been charged by the service provider in the correct amount.  

There are many approaches and options for efficiently meeting the increasing reporting requirements: outsourcing of the reports, introduction of standardized processes and effective controls, as well as the use of tools for tax determination up to automated VAT reporting. In order to increase the efficiency of the reporting obligations, the individual circumstances in the company must always be taken into account when implementing or modifying the processes or the tool.

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Reporting Requirements in Flux 

With the technical progress in accounting, the tax authorities are also pushing for more accuracy in reporting. This is reflected in the fact that the tax offices are increasingly handing over cases to the penal and fine offices if the advance sales tax returns or other reports contain significant errors in reportable sales, or if the reports are submitted late. In addition, questions are raised as to whether the conditions for penalty-protected tax reduction or even tax evasion have been met, which can result in personal penalties for the contact persons involved in fulfilling the reporting obligations. 

For us, the fulfillment of VAT reporting obligations is not a standard task and is more than just “numbers in forms”. Rather, we pursue a uniform strategy, domestically and internationally, to support our clients in this challenging task. We draw on many years of experience and use well-known as well as self-developed state-of-the-art technologies.

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The Acid Test

Plausibility checks and validations are part of our toolbox for every assignment. For example, we calculate the VAT payable based on the sales from the income statement and compare this with the VAT posted in the ERP system and with the VAT liability shown on the VAT accounts. We resolve reconciliation differences with our clients to ensure a complete VAT return. In addition, we check high-risk items in the return through random document checks, in particular incoming invoices and evidence of tax-exempt output transactions (export, intra-community supply). 

The starting point for our support in fulfilling reporting obligations is either standard reports from the ERP system created by our clients, system data that has already been prepared, or a data extract from the ERP system at transaction level that we have preconfigured. 

We tailor our support to the risk profile and the respective needs of our clients while considering their reporting obligations. Our range of services includes:

• the preparation of annual VAT returns (including full validation of VAT and input tax positions),
• ongoing VAT quality assurance checks of accounting data, including clarification of all reconciliation differences, whereby the advance VAT return is only a by-product, and the
• the preparation and submission of Input VAT refund application.

In all approaches, we use our experience and the information we gain from processing our clients' data to improve the quality of the systems used and the accounting material in general; and to identify opportunities to optimize our own processes and identify potential savings.

Indirect Tax Edge 

Particularly in the case of internationally active companies that must fulfill VAT reporting obligations in several countries, stringent monitoring of the VAT aspects of the business is necessary in order to identify and minimize risks in good time. Not least because of the immense effort involved, more and more companies of all sizes are deciding to outsource the fulfillment of their VAT obligations. This is where we provide support through PwC's global network of VAT specialists, who combine local expertise and many years of experience with modern data analysis tools and, in a globally uniform approach using our global technology “Indirect Tax EDGE”, ensure that companies fulfill their legal obligations without having to invest large amounts of human or financial resources. If desired, we can complete our offering with central project management and dashboard-based evaluations of key performance indicators to simplify your VAT management in an international context.